Earnings call transcript: Greenfire Resources faces operational challenges in Q2 2025

Published 07/05/2025, 14:48
Earnings call transcript: Greenfire Resources faces operational challenges in Q2 2025

Greenfire Resources Ltd, operating in the Alberta oil sands, conducted its second-quarter 2025 earnings call, revealing significant operational challenges and strategic priorities. While specific Q2 financials weren’t disclosed, the company’s last twelve months show revenue of $550.15 million with a healthy gross margin of 32.64%. The company’s stock, trading under the symbol GFR, recently saw a decline of 4.73%, closing at $4.52, amid broader production volatility concerns. According to InvestingPro analysis, the stock appears undervalued based on their proprietary Fair Value model.

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Key Takeaways

  • Greenfire Resources is grappling with production challenges, including accelerated decline and sulfur emissions.
  • The company plans to drill new wells and install sulfur removal facilities by Q4 2025.
  • Strategic focus is on maximizing net asset value per share through targeted development.

Company Performance

Greenfire Resources is facing significant operational hurdles. The company operates in the Alberta oil sands, a sector known for its volatility. During the call, management acknowledged the challenges posed by an accelerated base decline and sulfur emissions, with one of four boilers offline due to sulfur production issues. Despite these hurdles, the company is focused on long-term growth through strategic drilling and development plans.

Financial Highlights

  • No specific revenue or earnings figures were disclosed.
  • The company is reviewing its bond structure, which it deems inappropriate for its current business size.

Market Reaction

Greenfire Resources’ stock price dropped by 4.73%, closing at $4.52. This decline reflects investor concerns over the company’s production challenges and lack of specific financial guidance. InvestingPro data reveals the stock has suffered a significant 41.83% decline over the past six months, with the current price near its 52-week low of $4.36. Despite the bearish sentiment, the company maintains strong fundamentals with a P/E ratio of 4.39 and an EV/EBITDA of 3.25, suggesting potential value opportunity.

Outlook & Guidance

Greenfire Resources did not provide specific 2025 capital or production guidance. However, the company is prioritizing the development of its expansion asset and plans to drill new wells by Q4 2025. The installation of sulfur removal facilities is also scheduled for the same period, aiming to address regulatory compliance and production stability.

Executive Commentary

  • Adam Wadris, Executive Chairman, emphasized regulatory compliance: "Greenfire takes its regulatory obligations very seriously."
  • Colin, an executive, highlighted the focus on talent acquisition: "We are focused on attracting top performing individuals."
  • Wadris also noted the ongoing review of the capital structure, stating, "We haven’t made a decision yet on what we’re going to do."

Risks and Challenges

  • Production decline: Accelerated decline and sulfur issues pose significant operational risks.
  • Regulatory compliance: Exceeding sulfur emission limits could lead to regulatory penalties.
  • Capital structure: The current bond structure may not support future growth needs.
  • Market volatility: Operating in the Alberta oil sands exposes the company to market fluctuations.
  • Talent acquisition: Attracting skilled professionals is crucial for executing strategic plans.

The earnings call highlighted Greenfire Resources’ commitment to overcoming current challenges while strategically positioning itself for future growth. However, the lack of specific financial guidance and ongoing operational issues continue to weigh on investor sentiment.

Full transcript - Greenfire Resources Ltd (GFR) Q1 2025:

Conference Operator: morning, ladies and gentlemen. Welcome to the Greenfire Resources First Quarter Results Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the meeting over to Mr. Robert Lobach, Vice President of Capital Markets.

Please go ahead, Robert.

Robert Lobach, Vice President of Capital Markets, Greenfire Resources: Thank you, operator. Good morning, and welcome to Greenfire’s conference call for our Q1 twenty twenty five results. Please note that today’s call includes forward looking statements and references non GAAP and other financial measures. We encourage you to review the associated risks detailed in our latest MD and A. Unless specified otherwise, all monetary figures discussed today are in Canadian dollars.

The capital expenditures and production figures presented today are based on our working interest net to Greenfire unless noted otherwise. Joining us on today’s call are key members of Greenfire’s leadership team, including Adam Wadris, Executive Chairman and Paul Indramanek, President Tony Kraljic, Chief Financial Officer and Jonathan Kindurka, Chief Operating Officer. Upon the conclusion of our prepared remarks, I will open the floor to questions from participants. I will now hand over the call to Adam.

Adam Wadris, Executive Chairman, Greenfire Resources: Thank you, Robert, and welcome everyone to Greenfire’s Q1 twenty twenty five conference call. Prior to opening up the call to questions, we just have a few brief comments on the business. Let’s touch on the bad news first. The punch line is that the current production at Greenfire’s expansion asset has been poor and is primarily attributable to three factors. First, Greenfire’s twenty twenty three and 2024 refill program has accelerated the base decline profile at the expansion asset.

Second, one of four boilers at our expansion asset has been off line due to wear from sulfur production at the central processing facility. We believe the root cause of the excess sulfur production is due to operating the reservoir at a high pressure and temperature during late life recovery. Third, and related to the second challenge, Greenfire sulfur emissions are currently exceeding the Alberta energy regulators maximum limit. Upon learning of the exceedance, Greenfire immediately reported the breach to the AER and has been in active dialogue with the AER ever since. Greenfire takes its regulatory obligations very seriously and has ordered sulfur removal facilities at the expansion asset with in salute installation and commissioning targeted for Q4 twenty twenty five.

Given these challenges, it would be premature to provide 2025 capital or production guidance at this time. So that is a snapshot of the current challenges, which, of course, we are laser focused on addressing. Now let’s turn to some brighter news, which is the high quality work we have progressed on Greenfire’s future development plan.

Colin, Unknown Executive, Greenfire Resources: I will now turn it over to Colin to touch on this. Thanks, Adam. Before I touch on our future development plans, I want to highlight that an integral part of Greenfire’s strategy since I joined has been a cultural overhaul, which is gaining momentum. At Greenfire, we are focused on attracting top performing individuals with a constant focus on our IEI mantra, that is integrity, energy and intelligence and in that order of importance. We have introduced initiatives to embed a safety first mindset and elevate performance across all levels of the organization.

Following the recent organizational restructuring, we have added professionals of proven track records in SAGD to support Greenfire’s development. Now I’d like to provide a small preview on our future development plans, which we’re very excited about. We’re going to be focusing on drilling new long cycle well pairs in undeveloped reservoir at the expansion asset. Our near term priority is to drill wells just Northeast of the Greenfire Central processing facility. The region contains well delineated reservoir directly offsetting existing production, and we plan to start drilling as soon as Q4 twenty twenty five.

As we look into the medium term, our next priority will be to develop reservoir that is just Southeast of the Greenfire’s CPF and contains the largest amount of undeveloped 2P reserves in the company. Our governing approach with this multiyear development plan is to ensure that capital decisions align with our goal of maximizing net asset value per share and deliver strong returns for Greenfire shareholders. We will provide the details of the new development plan once it’s finalized. We’ll now open it up for Q and A.

Conference Operator: Thank you. We will now take questions from the telephone lines. Our first question is from Jason Wangler from Imperial Capital. Please go ahead.

Jason Wangler, Analyst, Imperial Capital: Good morning. Just understand obviously what you’re talking about as far as kind of going forward with the development program. Can you just talk about this year kind of obviously the production drop? We kind of at a level that you think stabilizing? Or where do you think the production kind of goes until you start to ramp back up on the drilling side?

Colin, Unknown Executive, Greenfire Resources: Yes, it’s a good question. Through the first quarter and into April, we’ve seen some declines. Our base production is high recovery factor. We drilled some refills over the last couple of years. So we have pretty steep declines in Q1.

We do expect those declines to shallow out a bit, but we do expect production to decline a little bit throughout the year. But we can’t really provide any specific numbers or guidance until we finalize our plans.

Jason Wangler, Analyst, Imperial Capital: Okay. And maybe just on the financial side, I saw in the slide you guys kind of mentioned the bonds specifically maybe something that I think you guys are looking at talking about I guess the entire capital structure. Can you talk about what you’re thinking about how you optimize that part of the business as you kind of also are working on the production side as well?

Adam Wadris, Executive Chairman, Greenfire Resources: Sure. This is Adam Marshall. I’ll take that. So we think that generally speaking, the business the amount of bonds is not appropriate for the size of the business today. And so we look at those as being transitory.

We haven’t made a decision yet on what we’re going to do, but we don’t think that those bonds are an appropriate part of the long term capital structure of the business. I appreciate it. Thank you.

Conference Operator: Thank We have no further questions registered at this time. I would now like to turn the meeting back over to Mr. Lobach.

Robert Lobach, Vice President of Capital Markets, Greenfire Resources: Thank you, operator. On behalf of Greenfire, we appreciate you joining us on our Q1 twenty twenty five results conference call. Have a great day.

Conference Operator: Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

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